If there is a core to the Miliband project, it is surely the vision of a more responsible, productive and equitable form of capitalism. The limits of New Labour’s approach – to abandon the search for an alternative political economy and focus on redistribution – became painfully apparent by 2008–2009.
The answer is not to wind back the clock to the days of industrial subsidies, state ownership and planning agreements. It didn’t work then and it wouldn’t work now. Responsible capitalism aims to structure the economy in a way that produces better social outcomes without the need for costly and intrusive state interventions. There is no blueprint for how to do this, but I would identify the following as areas for priority action by an incoming Labour government:
1. Changing the relationship between finance and industry to fund long-term, productive investment. Labour’s proposals for a British Investment Bank and a new system of regional banks will help to redress the imbalance, provided they are properly capitalised. Funding productive investment with a transactions tax on unproductive speculation would be a logical and popular step.
2. Reforming corporate governance. The dominance of the PLC with its single-minded pursuit of shareholder value and short-term profit is a major cause of the UK’s long-term decline as an industrial power. This requires lots of rather dull micro-measures, like reducing the frequency of company reporting, as Labour has proposed. One of the more important is to create mechanisms for institutional investors to exert more influence in order to establish a higher baseline of committed ownership.
3. Ending corporate tax avoidance. Loopholes and abuses mean that taxation for many large companies has become option rather than an obligation – this isn’t fair on the rest of us. Does anyone really buy the idea that Starbucks doesn’t make a profit in the UK? Labour’s promise to crack down on tax havens and transfer pricing are welcome, although we have yet to see the detail.
4. Raising living standards and reducing income inequality. A strong and sustainable recovery will be one that promotes growth from the middle out, as Ed Miliband has argued. A commitment to gradually raise the minimum wage to the level of the living wage would help. Why not insist that executives who want to give bonuses to themselves should also give them to the workforce as a whole? Economic success isn’t about a handful of corporate galacticos
5. Initiating an ownership revolution. Miliband has said relatively little about the ownership structure of British business. Labour has rightly ruled out a return to Morrisonian nationalisation and has tentatively suggested mutuals and partnerships as attractive options in certain areas. It should be more ambitious: greater plurality of ownership forms that include employees and consumers would help to reduce inequality and create the committed ownership the UK needs, from passenger-owned transport companies to fan-owned football clubs.
6. Taming globalisation. Apart from promising to clamp down on tax havens and qualified support for a Financial Transactions Tax, Labour hasn’t said much about the changes that could be made at an international level to promote responsible capitalism at home. Stronger agreements on labour rights, environmental protection, financial transparency and taxation are needed to stop corporations from undermining progressive policies by playing one country off against the other.
The basic question behind this debate is whether the market economy should be restructured to meet the needs of society or whether society should continue to be restructured to meet the priorities of the market. Miliband has already gone a long way to providing the right answer, and he should be encouraged to continue.
This article was originally published in the Autumn edition of the Fabian Review